mega backdoor roth rollover

[Case]

It appears that my employer's 401k plan allows for a mega backdoor Roth conversion, and so I am pursuing it: I am able to make after-tax contributions to my 401k and I am able to make 2 service withdrawals per year.

Can people that are familiar with this verify that my understanding is correct? 
-first, I max out my pre-tax contributions.  This will take some months as my employer only allows a maximum contribution of 40% per pay check.
-second, I change to contribution elections to make the full 40% go towards the after-tax 401k.
-over the next few months, money accumulates in the after-tax account, and then twice per year (presumably at ~$14.5k intervals) I rollover the after-tax money into my Roth.
-After I have reached the max for the mega backdoor, I then switch the contribution elections to the pre-tax account for the next year, and then rinse and repeat.

[dandarc]

Good plan so long as this won't cost you any match.  If there is a match, make sure you're 100% on how it works - some 401K's having any paychecks with no 401K deferral = no match on that income.  Others will true up at year end.

So, just make sure you know all the rules.

[Case]

Good plan so long as this won't cost you any match.  If there is a match, make sure you're 100% on how it works - some 401K's having any paychecks with no 401K deferral = no match on that income.  Others will true up at year end.

So, just make sure you know all the rules.

I think it would be ok - the company match is given up to a certain percentage on the pre-tax account.  The after-tax account contributions after I have already maxed out the pre-tax one.

What do you mean by true up at the end of the year?  Do you mean if I first did the after-tax contributions, and then did the pre-tax before the end of the year in order to make sure I get the match?

[dandarc]

So say the match is up to 6%.  But it is strictly by paycheck.  So if you do 40% for 3 months and then you hit the cap and have to stop deferrals, you'll get 6% matched on those 3 months, and no match for the remaining 9.

If the company does a true-up, they'll recognize that you contributed 6% of pay over the course of the year, and then make that 9 months of match at some later point. True it up with "as if you had spread the contributions evenly."  Not all companies do that though - the federal TSP doesn't, for example.

[Case]

So say the match is up to 6%.  But it is strictly by paycheck.  So if you do 40% for 3 months and then you hit the cap and have to stop deferrals, you'll get 6% matched on those 3 months, and no match for the remaining 9.

If the company does a true-up, they'll recognize that you contributed 6% of pay over the course of the year, and then make that 9 months of match at some later point. True it up with "as if you had spread the contributions evenly."  Not all companies do that though - the federal TSP doesn't, for example.

Oh, excellent point, I"ll check up on that.

[Case]

So say the match is up to 6%.  But it is strictly by paycheck.  So if you do 40% for 3 months and then you hit the cap and have to stop deferrals, you'll get 6% matched on those 3 months, and no match for the remaining 9.

If the company does a true-up, they'll recognize that you contributed 6% of pay over the course of the year, and then make that 9 months of match at some later point. True it up with "as if you had spread the contributions evenly."  Not all companies do that though - the federal TSP doesn't, for example.

So I checked into this; my plan does have a true up at the end of the year (as long as you are still employed there).  BUT, my plan also counts the after-tax contributions and matches them, so actually I would be ok regardless (I don't get additional bonus match for the after tax contributions; just i'm able to get the full employer match each month).

[BiotechGuy]

My 401k is with Fidelity and they allow in-plan rollovers of after-tax supplemental contributions. So for mine, basic contributions are the first 4% and are matched whether pre or post tax. Any contribution after that 4% is supplemental. The issue is they won't let you rollover after tax basic contributions, only supplemental.

So I actually tried what was proposed (maxing out pretax and moving on fully to after tax) but ended up with an after tax nut that's classified as a basic contribution that can't be moved into a Roth. Still got the match but not what I was after.

Each plan has its own wrinkles so you'll need to probably speak to them to figure out how to make it work. For my plan, I need to take out at least 4% pretax each month to be able to rollover any supplemental after tax.